On June 5th, approximately $1.89 billion worth of BTC and ETH options expired, coinciding with a weakening crypto market. Bitcoin had previously approached $60,000, and Ethereum was nearing a recent low, making this expiration particularly noteworthy.
BTC is well below key pain points
According to Greeks.live data, approximately 25,600 Bitcoin options expired that day, with a notional value of about $1.62 billion. The put/call ratio was 0.56, with the main pain point around $70,500.
However, before expiration, the price of Bitcoin had fallen significantly below this level. During the previous decline, BTC briefly approached $60,000, meaning that the settlement price of many short-term options deviated from market expectations.
Ethereum also faces expiration pressure. Approximately 155,000 ETH options expire on the same day, with a notional value of about $270 million and a put/call ratio of 0.92. The main pain point is around $2,000.
- BTC options expiring: $1.62 billion
- ETH options expiring: $270 million
- The combined size of the two is approximately US$1.89 billion.
Downside protection demand rises
Greeks.live indicates that short sellers were more active in the first half of the week as Bitcoin fell below $70,000. The market added short positions around $68,000, $65,000, and $60,000 to hedge against further declines.
The agency also stated that the price decline led to an increase in short-term volatility and a negative skewness, indicating that the market's demand for downside protection is greater than its interest in upside exposure.
In its June 5th update, Greeks.live noted that both BTC and ETH prices have significantly deviated from their respective support levels, leading to a decrease in overall market interest and a shift in attention towards US stocks. Their assessment is that while the market is not heavily betting on a one-sided crash, the demand for active hedging is increasing.
Middle East news drives cross-market volatility
This round of decline in crypto assets is also in line with fluctuations in global risk appetite amid changes in the Middle East situation. After Israel and Lebanon agreed to implement a ceasefire on June 4, the market initially bet on a possible easing of regional tensions.
Following the announcement, oil prices initially fell, with the decline exceeding 3% at one point. The market anticipated that a de-escalation of the situation could alleviate shipping pressures in the Strait of Hormuz. Gold also fluctuated as the dollar and US Treasury yields declined.
However, this expectation of easing did not last. Hezbollah subsequently rejected the agreement, and Israel stated that it would not withdraw its troops from Lebanon, reigniting market concerns about US-Iran negotiations and energy transportation.
The market continues to observe the return of funds.
Currently, the crypto market is more focused on whether funds will flow back after options expire. Bitcoin remains near the lower end of its recent range, while Ethereum continues to be under pressure, and overall risk appetite has not yet shown significant improvement.
The market will continue to closely monitor BTC's performance around $60,000 and ETH's performance around $2,000, as well as the further guidance from oil prices, gold, and US stocks on risk sentiment.
